Fundrise, RSE Capital Initiate $500M Opportunity Fund

The fund will enable the online purchase of shares in opportunity-zone projects. The initiative was possible after the new federal tax law introduced the Opportunity Zones program that provides tax incentives for long-term investment in designated areas.

Fundrise Opportunity Fund will be the first reserve of the kind to provide online investment in opportunity-zone projects, making the new tax incentives program available for smaller investors nationwide. Through Fundrise, its affiliated investment platform, RSE Capital plans to raise $500 million by the end of 2019.

Investors will be able to buy shares online for the minimum of $25,000. According to Fundrise, there are roughly $2 trillion in unrealized gains that can be rolled into opportunity funds.

“While around one eighth of all neighborhoods in America have been designated as opportunity zones, we feel that some have more immediate investment potential than others,” Ben Miller, co-founder & CEO of Fundrise, told Multi-Housing News. “For example, opportunity zones now include tracts of infill neighborhoods like Downtown L.A. and Arts District that are currently undergoing a revival, driven by the synergies between relatively affordable housing, the extension of the Expo and Metro rail lines, and new employers like Spotify and Soylent.”

Last month, RSE purchased a mixed-used property in the LeDroit Park neighborhood of Washington, D.C. The neglected site has been vacant since the riots of 1968. The company is planning on renovating the retail space on the ground floor and adding residential units above it. The redevelopment will stand as an example for the type of investments the opportunity fund is targeting.

Saluted incentive program

Included in the Tax Cuts and Jobs Act—enacted in December 2017—the Qualified Opportunity Zone program encourages long-term investment in underserved communities, through tax incentives. “Opportunity zones could do more for economic development than any incentive program in U.S. history,” Miller said.

The provision enables real estate investors selling a property to defer paying capital gains taxes until 2026 if they reinvest the profits in funds that target opportunity zones. The program represents an opportunity for the workforce population and encourages the development of new infrastructure, housing and neighborhood amenities.